Verification of Funds on Reverse Mortgages

The purpose of the memo is to clarify the documentation requirements in
circumstances where the borrower is required to bring funds to closing for
payoff of liens, closing costs, down payment, short-pays, etc.

All required funds for the borrower’s investment in the property, either to
purchase a new property or to payoff existing liens and closing costs on
current residence, must be verified and documented.
Prospective mortgagors must use their own money (money obtained from
sale of assets, and/or sale of current home) or gift for the required monetary
investment.

Documentation Requirements:
The documentation requirements are as follows:
A. Borrower providing funds:
1. Checking/Savings Account
The following may be used to verify savings and checking accounts1:
• Purchase - An original verification of deposit, along with the most
recent bank statement (all pages, stamped certified true copy) OR
the three most recent and consecutive original bank statement(s) (all
pages, stamped certified true copy), belonging to the borrower, which
cover the most recent three-month period and previous month’s
balance. Cash on hand is not allowed.
• Refinance - The most recent bank statement (all pages, stamped
certified true copy) , belonging to the borrower, which covers the
most recent one-month period and previous month’s balance. Cash
on hand is not allowed.
If there is a large increase in an account, or the account was opened recently,
the lender must obtain a credible explanation of the source of those funds. A
large deposit is defined as a deposit that exceeds borrower’s monthly income
or customary monthly deposits.
2. 401K
If the borrower is obtaining money from their 401K, the following documents
are required:
• Most recent quarterly statement (all pages).
• Proof of withdrawal from 401K.
• Copy of the Cashiers check at closing.
3. Stocks, Bonds and Mutual Funds
Verify existence of stock/bond/mutual fund via
• Current statement from stockbroker or financial institution, OR
• Photocopies of stock/bond certificate with updated newspaper stock
list.
• Stock/bond certificate must be reduced in size when photocopied and
the word "COPY" must be written or stamped across the face of the
copied certificate.
• Verify receipt of funds realized from sale/liquidation.
4. Proceeds from Sale of Existing Home
• A copy of the HUD-1, Purchase Contract executed by all parties and
cashiers or certified check bearing the name of the borrower can be
used to verify funds from the sale of a home.
• A wire transfer statement showing Settlement Agent as sender and
Borrower as recipient can also be used.
B. Borrower receiving partial or total funds as a Gift:
1. Copy of donor check made out to our borrower. If the donor makes check out
to the Closing Agent (which is not recommended), a copy of the gift check is
required and funds should be certified.
2. Proof that funds were deposited into our borrower’s account
3. Proof that borrower has the required additional funds, if applicable. (if partial
gift received)
4. Gift Letter/Affidavit from donor containing the following information:
a) The dollar amount of the gift
b) Name of the donor
c) The donor's signature
d) The donor’s address
e) The donor’s telephone number,
f) The donor’s relationship to the borrower (must be a family member)
g) The name of the borrower
h) The borrower's signature(s)
i) The letter must state that no repayment is required.
j) Language asserting that the funds were not made available to the donor from
any person or entity with an interest in the sale of the property.
k) Statement from donor that funds were gifted to our borrower to go towards
this Reverse Mortgage transaction.
Note: Gifts of Equity are not permitted.